Context: A homeowner passed away in 1999 and the house ownership was moved into a trust. At that time the house was worth ~120k. It is now worth ~400k. The beneficiaries are divided equally among 3 people (A, B, C). One of those people (A) has stayed in the house over two years since 1999. A, B and C are all in different tax brackets.

Goal: Person A to own the house exclusively. Person B and C be compensated for 1/3 the market value of the house each.

Question: What are the available ways to achieve the goal with the lowest tax implication to A, B and C? For example, could the trust sell the house to A and utilize the 250k 'home sale tax deduction'?

  • How does living in the house ‘over 2 years’ get to claim the full $250K exclusion vs a 20 year holding period? Can you be more specific about how long A lived in the house? – JTP - Apologise to Monica Aug 7 '19 at 0:53
  • What does the professor say? or the book? – GµårÐïåñ Aug 7 '19 at 1:33
  • @JoeTaxpayer I'm not sure. I tried to search around online and saw here that if you lived in a house more than two years you could get that exclusion. That was a (probably dumb) example. Person A lived in the house between 2006 and 2012. – Ryan Callens Aug 7 '19 at 2:15
  • @GµårÐïåñ This isn't from a professor or a book. This is a question I've asked based on real-life. If that information is relevant I can update the question to be more precise. – Ryan Callens Aug 7 '19 at 2:17
  • 1
    Exactly what kind of trust is it? – Jack Fleeting Aug 7 '19 at 10:48

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